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DECISION No

DECISION No. 13/1999/QD/BNN-CS OF JANUARY 16, 1999 PROMULGATING THE AMENDED REGULATION ON CREDIT AND SAVINGS

THE MINISTER OF AGRICULTURE AND RURAL DEVELOPMENT

Pursuant to Decree No.73/CP of November 1st, 1995 of the Government on the functions, tasks, powers and organizational structure of the Ministry of Agriculture and Rural Development;

Pursuant to the Decision on the establishment of the Management Board of Vietnam- Sweden Program for the Development of Mountainous Rural Regions of February 12, 1996;

At the proposals of the head of the Department for Agriculture and Rural Development Policy, the manager of the project for enhancing the Ministry�s consulting capability and the executive manager of the Board�s Office;

DECIDES:

Article 1.- To issue hereby the amended Regulation on Credit and Savings applicable to the Vietnam - Sweden 1996-2000 Program for the Development of the Mountainous Rural Regions.

Article 2.- This Decision takes effect 15 days after its signing. All previous project documents contrary to this Regulation are now no longer effective.

Article 3.- The managers of the projects on development of the mountainous rural regions of Lao Cai, Yen Bai, Ha Giang, Tuyen Quang and Phu Tho provinces, the project for enhancing the Ministry�s consulting capability, the Program�s executive manager and the director of the Ministry�s Office shall have to implement this Decision.

For the Minister of Agriculture and

Rural Development

Vice-Minister - Head of the Management Board of Vietnam-Sweden Program for Development of Mountainous Rural Regions
NGUYEN QUANG HA

REGULATION (AMENDED) ON CREDIT AND SAVINGS

(Issued together with Decision No.13/1999/QD-BNN-CS of January 16, 1999 of the Minister of Agriculture and Rural Development)

Part I

GENERAL PROVISIONS

Article 1.- The purposes of credit and savings activities

The activities of providing credit and savings services, training and seminar services, which are included in the contents of the rural financial service (hereafter abbreviated as RFS contents) in the Vietnam-Sweden Program for the Development of Mountainous Rural Regions (hereafter referred to as the Program for short) aims at:

1. Building and developing models of sustainable credit and savings groups capable of being widely applied and of serving the agricultural, rural and mountainous development.

2. Providing in a quick, timely and convenient manner the credit and savings services for family households to develop production and business.

3. Enhancing various managing levels� capability to effectively manage the Program�s credit capital sources.

4. Building and developing the Program�s credit and savings groups into rural financial institutions after the Program concludes, thus contributing to the socio-economic development.

Article 2.- The scope of application

This Regulation shall apply to all activities related to the RFS contents, the Office of the Program Board, the ministerial projects, the provincial projects, the district project management boards, the commune project management boards and credit and savings groups. Joint programs with financial/credit/banking organizations shall be effected under separate agreements reached between the Program and such organizations.

Part II

ORGANIZATION AND MANAGEMENT

Article 3.- Organizational structure

The development support for RFS activities shall be rendered through the Program Board�s Office, the ministerial projects and five projects of the provinces of Phu Tho, Tuyen Quang, Yen Bai, Ha Giang and Lao Cai.

For the provincial project, it can, depending on its practical situation, be organized into:

a) 4 levels: provincial, district, commune and credit & saving group; or,

b) 3 levels: provincial, district (or commune) and credit & savings group; or

c) 2 levels: provincial and credit & savings group.

Article 4.- The head of the Program Managing Board

The head of the Program Managing Board shall, on behalf of the Ministry of Agriculture and Rural Development, sign for promulgation the Program�s credit and savings policies; and conclude cooperation agreements with other agencies and organizations.

Article 5.- The Program�s executive manager

The Program�s executive manager shall organize and coordinate the operations of the MILS management and supervision information system of the RFS contents.

Article 6.- The ministerial project�s manager

The manager of the project on enhancing the Ministry�s consulting capability the deputy-head of the Department for Agriculture and Rural Development Policy shall have the following functions and powers:

1. To prepare RFS policies and regulations and submit them to the Ministry of Agriculture and Rural Development for promulgation;

2. To monitor the implementation of already promulgated policies and regulations and propose necessary adjustments and amendments thereto;

3. To proceed with projects on cooperation with the State financial bodies as well as other agencies and organizations;

4. To draw up RFS training programs;

5. To coordinate with provincial projects in organizing the training of personnel for provincial projects and further projects on cooperation with the State financial organizations.

6. To organize the training and certificate-granting tests for members of the Management Boards of grade-II groups.

Article 7.- The provincial project�s manager

The provincial project�s manager shall have the following functions and powers:

1. To manage and preserve the allocated capital sources;

2. To disburse capital and recover loan capital;

3. To guide the management boards of district and commune projects and the management boards of credit and savings groups to implement this Regulation;

4. May authorize heads of district project management boards to manage part or whole of the projects� credit capital, evaluate and approve loans, recover loan capital with regard to the allocated credit capital;

5. To ratify the evaluation and classification of credit and savings groups submitted by districts, bank branches and organizations for cooperation with the Program, which are headquartered in the locality;

6. To manage, examine and supervise comprehensively all credit and savings activities of the Program in the province;

7. To submit quarterly reports to the Program Managing Board�s Office through the MILS system;

8. To organize RFS training for members of the management boards of the provincial, district and commune projects as well as the management boards of credit and savings groups.

Article 8.- The Head of district project�s management board

The head of the district project management board, besides the task of performing partly or fully the work authorized by the provincial project managers as defined in Article 7.4 of this Regulation, shall have the following tasks:

1. To participate in the implementation and guide the management boards of commune projects and credit and savings groups in the implementation of this Regulation;

2. To manage, inspect and supervise comprehensively the Program�s credit and savings activities in the locality;

3. To make MILS reports for submission to the provincial projects according to the prescribed MILS reporting regime.

4. To classify credit and savings groups in the locality and submit them to the provincial project managers for official ratification.

Article 9.- The head of the commune project management board

In communes where exist many credit and savings groups, the head of the district project management board shall authorize the head of the commune project management board to coordinate activities of the credit and savings groups in the commune. In all circumstances, the head of the district project management board must not authorize the head of the commune project management board to run the credit and savings management operations of the credit and savings groups.

Article 10.- The head of the credit and savings group management board.

The head of the credit and saving group management board shall be elected by the group members� congress and have the following functions and powers:

1. To represent the group in its transactions with the management boards of the commune/district/provincial projects;

2. To prepare agenda for, convene and preside over the group�s meetings.

3. To implement the Program�s regulations on credit and savings as well as the group�s statute.

4. To make monthly reports and submit them to the commune/district/provincial project management boards.

5. The head of the group management board shall also have other functions and powers prescribed by the group�s statute.

Article 11.- Relationship with other agencies and organizations

1. The relationship with the commune People�s Committees

The commune People�s Committee shall play the role of State management over the activities of the credit and savings groups in the locality, supervising their activities and certifying loan applications to ensure that the borrowers are lawful inhabitants in the commune and have full legal status; the commune People�s Committee shall not directly participate in running the professional affairs of the credit and savings groups.

The credit and savings groups shall have to register their operations with the commune People�s Committees. The groups� statutes and lists of group members must be certified by the commune People�s Committees.

2. The relationship with mass organizations as well as social and professional organizations.

The projects should step up relations with mass organization as well as social and professional organizations so as to ensure the efficient utilization of the Program�s credit capital sources as well as the participation of women, families headed by women and people of ethnic minorities.

3. The relationship with State financial bodies and organizations.

Projects jointly managed by the Program and State financial bodies and/or organizations shall comply with the agreements concluded between the Program and such bodies and/or organizations.

Part III

CREDIT AND SAVINGS GROUPS

Article 12.- The organizational structure of the credit and savings group

1. The concept of the credit and savings group

The credit and savings group is an organization of family households that reside and lawfully practice jobs in a commune, volunteer to join the group to practice thrift, borrow the Program�s capital for production, business and service development with a view to improving their living conditions, eliminating hunger and alleviating poverty. Each credit and savings group has its own statute which is certified by the commune People�s Committee and specifies the group�s operations .

2. The congress of the credit and savings group�s members

The highest organ of authority of the credit and savings group is its members� congress which is held annually after each year of its operation or irregularly at the request of at least 2/3 of the group�s members.

The congress shall approve the group�s statute, elect the management board, amend the statute, re-elect the management board, approve the financial settlement, decide the admission of new members, approve the leaving of the group by members and settle other things as prescribed in the group�s statute.

A resolution of the credit and savings group shall be passed according to the principle of majority by at least 2/3 of the total number of the group members.

3. The group�s management board

The group�s management board is elected by the members� congress with the following titles: The group leader, the chief accountant and the cashier. The management board shall have the following functions and tasks:

a) To assist members make loan applications and work out production and business plans;

b) To supervise the use of loan capital by members;

c) To receive and evaluate loan applications;

d) To make lists of borrowers and credit contracts with projects and/or members;

e) To join the provincial/district project management boards in distributing loan capital to borrowers;

f) To collect loan interests and support projects in the retrieval of loan capital;

g) To collect and manage savings money of the group members;

h) To effectively manage the group�s capital and funds;

i) To arrange and record in writing all meetings of the group;

j) To make and submit monthly reports to the commune/district/provincial project management boards;

k) On behalf of the group, to keep contacts with the commune People�s Committee and the commune/district/provincial project management boards.

The group management board shall also have other powers and duties prescribed in the group�s statute.

4. Conditions for credit and savings group membership

Citizens aged full 18 upwards, have full capacity for civil acts, are representatives of family households residing and practicing jobs in the area and volunteer to join credit and savings groups shall be their members.

The group members shall have to fulfill the following obligations:

a) To use the loan capital for the right purposes;

b) To fully contribute the obligatory savings to their respective groups;

c) To establish cooperation on the principle of equality, mutual benefits, mutual assistance and of ensuring the group�s common interests;

d) To compensate for damage caused due to their own faults;

e) Group members bear equal joint responsibility for loan capital from the Program;

f) Other obligations prescribed in their respective group�s statute.

The group members shall have the following rights:

a) To have equal access to the credit capital sources from the Program;

b) To attend refresher and training courses sponsored by the Program;

c) To join in making decisions on matters related to their groups� activities and inspect the groups� activities;

d) To elect or stand for the election to the group management boards;

e) Other rights prescribed by the group�s statute.

5. The credit and savings teams

Credit and savings groups with large membership may be divided into various teams.

According to the group�s statute, each credit and savings team shall elect its leader who shall represent the team in a number of transactions between members and the group management board as prescribed by the group�s convention. The group leader may authorize a team leader to receive savings and/or collect interests on capital loans of the group and the Program from the members and remit them to the group management board. In all circumstances, the group leader must not authorize the team leader to collect credit loans of the Program and perform such spending tasks as lending capital, paying savings and/or interests thereon or to sign on behalf of the group leader the capital-borrowing contracts of the members.

Depending on the specific situation, the group�s statute may prescribe additional functions and tasks for each credit and savings team regarding the following matters:

a) Assisting members to draw up production and business plans and fill the procedures for capital borrowing.

b) Considering and evaluating loan applications of members.

c) Helping one another to use the borrowed capital with high efficiency;

d) Helping members who are confronted with risks.

e) Collecting and remitting savings and collecting interests on loans;

f) If a member is unable to pay back a loan, the whole team shall have to pay it for him/her.

Article 13.- The credit and savings group�s statute

Each group shall have to elaborate its own statute (cooperation contract), which specifies the duties and rights of the group members, the group management board as well as the civil liability of the group. Such a statute must include the following main contents:

1. The group�s property

The group�s property shall include the contributions of its members, donations, gifts and accumulations of the group through its credit and savings activities.

For class-I credit and savings groups as prescribed in Article 15 of this Regulation, the group�s property shall not include the interests on loans of the Program, which have been retained to increase the group�s fund.

For credit and savings groups of classes II and III as prescribed in Article 15 of this Regulation, the group�s property shall include the interests on the Program�s loans, which have been retained to increase the group�s fund.

2. The group�s representative

The group leader shall represent the group in its civil transactions. He/she may authorize group members to perform certain tasks necessary for the group as prescribed in the group�s statute.

3. The group�s civil liabilities

a) The group shall have to bear civil liabilities for the performance of civil duties established and performed by the group�s representative in its own name;

b) The group shall have to bear the responsibility for the group�s common debts and other civil liabilities with its property. If the group�s common property is not enough for the performance of the common duties of the entire group, the members shall have to jointly bear the responsibility.

4. The admission of new members

The group shall admit a new member when it is so agreed by at least 2/3 of its members. Any persons wishing to join the group shall have to file application and accept the group�s statute as well as the Program�s regulations.

5. The group�s leavers

a) Members are entitled to leave their credit and savings groups after fulfilling the obligations to the group and the Program.

b) Members shall be compelled to leave their groups if they break the commitments made upon their participation in their groups and/or violate regulations of the Program as well as the statute of the group.

c) The group leavers shall have to fulfill all their obligations to their respective groups and the Program;

d) Members are entitled to request the return of their contributions after fulfilling relevant obligations.

6. Termination of the group�s operation

The group shall terminate its operation in the following cases where:

a) Its operation duration stated in the statute has expired;

b) The members agree to terminate the operation which has proved not beneficial to them.

Upon the termination of its operation, the group shall have to pay all its debts to the Program and other organizations. If its common property is not enough to pay debts, the members� private property shall be used for debt payment. The group shall have to report in advance to the project and the local People�s Committee which has certified the statute of the credit and savings group on the decision to terminate its operation.

Article 14.- The credit and savings group�s finance

1. A credit and savings group shall have the following revenues and expenditures :

Its revenues shall include:

a) Revenues for deposit interests;

b) Earnings from loan interests;

c) Other revenues.

Its expenditures shall include:

a) Payment of interests on savings of the members;

b) Payment of profits to the project;

c) Payment of renumeration to the group management board;

d) Administrative expenses;

e) Expenses for setting up the group�s funds;

f) Deductions for setting up the group�s risk fund.

2. The group�s capital sources and the use thereof:

Types of capital sources

a) Source of loan capital from the Program;

b) Sources of mobilized savings and contributed shares of members;

c) The Program�s profits retained to increase the group�s fund as prescribed in Article 20.a of this Regulation

d) Sources of risk fund;

e) The undivided profits.

The use of group�s capital

a) Loan credit balance;

b) Cash left at the fund.

c) Deposits at banks, treasuries or the higher-level project management boards.

The accounting of the group�s revenues, expenditures, capital source and the use thereof, funds and the use thereof shall comply with the unified accounting regime of the Program.

Article 15.- Classification of credit and savings groups

Annually, the provincial projects shall have to classify the credit and savings groups according to the following criteria:

Class-I group:

a) Having the statute certified by the commune People�s Committee; having the group management board elected by group members, and

b) The management board has been given training in the group management by the Program.

Class-II group:

The class-II group shall have to meet the criteria of class � I group and have other criteria on group management experience, the sustainability of its own capital in two consecutive years by the time the group classification is made. The concrete criteria are as follows:

1. The group has not breached this Regulation and other stipulations and legislations;

2. The leader, the chief accountant and the cashier of the group have fully attended training courses, passed all examinations and been granted the class-II group management certificate.

3. The group�s property by the time of classification has a value which is bigger than 25% of the capital borrowed from the Program at the peak time in the two years close to the classification time.

4. The savings contributed by members have at least reached the average of 120,000 dong per head by the time of classification;

5. The ratio of the overdue debts to the total debts by the time of classification shall not exceed 5%;

6. The reports on management have been completed and submitted to the higher-level project management board on schedule.

7. The classification has been approved by the project manager.

Class-III group:

Besides the criteria prescribed for class-II group, the following must also be met: The group�s property is larger than 40 million VN dong by the time of classification.

Part IV

LENDING

Article 16.- Lending purposes

The Program shall provide family households in the project regions with capital for use in project of high technical feasibility and socio-economic efficiency in order to develop the mountainous countryside, thus contributing to hunger elimination and poverty alleviation in localities of the project regions.

Article 17.- Conditions for capital borrowing

Loans provided from the Project shall not require the property mortgage by the borrowers. Those family households that are members of the Program�s credit and savings groups and meet the following conditions may borrow credit capital from the Program:

1. Accepting the Program�s regulations and the groups� statute;

2. Being capable of using and refunding the loan capital;

3. Submitting loan application-cum-plan for production and business activities (according to set form of the Program).

4. Having cleared off all overdue debts from the Program and/or groups.

5. With at least 2/3 of the group�s members having agreed on the lending.

Article 18.- Lending term

The lending terms shall not exceed 12 months for short- term loans and 24 months for medium-term loans. The specific term for each loan shall comply with the production and/or business cycle and the borrower�s debt-paying capability. Loans used for the purpose of production and business development shall be ratified by the provincial project mangers on the case by case basis.

Article 19.- Lending interest rate

The interest rate on the Program�s loans lent to members of credit and savings groups applicable to all provincial projects shall be 1.0%/month. The Ministry of Agriculture and Rural Development shall issue specific notice to the provincial projects when this interest rate is adjusted.

The interest rate on loans from the groups� capital funds (savings deposit, contributions from members, deductions from interests on loans from the Program�s capital sources as prescribed in Article 20.a of this Regulation) shall be decided by the credit and savings groups but must be higher than the interest rate on the members� savings deposits and not exceed the ceiling lending interest rate in the countryside as provided for by the State Bank of Vietnam, applicable to the People�s Credit Funds, which is 1.5%/month at present.

Article 20.- Division of profits from interests on the Program�s capital loans.

The profits earned by the credit and savings groups from the Program�s capital loans shall be split according to the following ratio:

a) 55% shall be fuelled into the group�s fund. The credit and savings group shall be fully entitled to use this sum as loans to its members and shall have to refund it to the Project. When a credit and savings group reaches the class-II level, this deduction amount shall belong to its ownership.

b) 25% shall be used for setting up the management fund and the payment of remuneration and expenses for the administration of the group. The remuneration level paid to the group�s managerial cadres including leaders of credit and savings teams (for group divided into credit and savings teams) shall be prescribed in the group�s statute. Upon the completion of the settlement at the end of the fiscal year, the remainder, if any, of the management fund shall be remitted into the group�s fund.

c) 5% shall be reserved for setting up the group�s risk fund which shall be used to support group members in the event of risks. The support level shall be prescribed by the group�s statute. If the risk fund remains temporarily idle, the group may deposit it as demand savings at a bank or the State Treasury.

d) 15% shall be remitted to the district and provincial project management units. The provincial project manager shall specify in writing the purposes and levels of spending from this sum for activities related to the management of the Project�s credits and savings.

Article 21.- Division of profits earned from the interests on the group�s capital loans.

The division of profits earned from the activities of lending of capital from the group�s self-created fund (savings deposits, shares of members, deductions from interests on the Program�s capital loans for establishment of funds, risk fund) shall be decided by the group itself.

Article 22.- Lending levels and loans for business development

a) The lending level: The total amount of loans lent to each group member shall not exceed 2.5 million VNdong.

b) Loans for business development: Every loan exceeding 2.5 VNdong must be applied for in writing directly to the Project by the borrower. The Project�s maximum business development loan amount provided for a member household of the group shall be 10 million VNdong. The capital-borrowing dossiers submitted by the borrower must be evaluated by the group before it is transferred to the Project for the final appraisal, then the approval and the signing of a loan contract.

Article 23.- The capital-lending dossiers

The Program issues together with this Regulation documents related to the procedures for capital borrowing, loan capital consideration and approval, debt payment prolongation, overdue debt transfer, including the following forms:

1. The loan application: made in one copy and sent to the project by the borrower.

2. The loan appraisal record: made in two copies by the group, with one copy being kept at the group and the other sent to the Project.

3. The loan notice: made in two copies by the Project, with one copy being kept at the Project and the other sent to the credit and savings group.

4. The credit contract: made in two copies, with one being kept by the borrower and the other by the lender.

5. The record on the inspection of the use of loan capital: made in two copies, one is kept by the project and the other by the group.

6. The debt prolongation application: made in one copy and sent to the lender by the borrower.

7. The debt prolongation notice: made in two copies by the Project, one is kept by the Project and the other by the group.

8. The overdue debt transfer notice: made in two copies by the project, one is kept by the Project and the other by the group.

Besides, the spending acknowledgement papers must be issued when loans are provided or the money receipts must be issued when debts are collected; such spending acknowledgement papers and money receipts shall be kept together with other documents related to each loan.

The dossier-keeping principle: The lender, the project or the group, shall have to keep the lending dossiers which must be safely kept like money and easily to find and to get.

Article 24.- Loan appraisal and approval process

The loan appraisal and approval process prescribed below shall be commonly applied to loans provided from the Program�s capital source for credit and savings group members.

1. Appraisal

The provincial project manger shall have to appraise capital-borrowing applications before they are approved. The contents to be appraised shall include:

a) The use purposes of the loan capital;

b) The possibility to recover the loan, both the principal and the interest.

If the provincial project manager authorizes the head of the district project management board to appraise the loan, the loan appraisal shall be made by the latter.

2. Loan approval

Basing him-/herself on the result of the borrower�s application, the provincial project manger shall sign to approve the loan. If the provincial project manager authorizes the head of the district project management board to approve the loan, the latter shall sign to approve the loan.

3. Time limits for loan appraisal and approval

a) Within 03 days after receipt of an application from a member, the credit and savings group leader shall have to complete the procedures for evaluation in the group and for certification at the commune People�s Committee for submission to the district/provincial project.

b) Within 07 days after the project manager/the head of the district project management board receives the dossiers of loan application, a notice on loan approval or disapproval must be sent to the concerned credit and savings group leader who shall have to inform the relevant member of his/her group thereof.

Article 25.- Capital disbursement

Basing him-/herself on the approved loan dossier, the project manager/the head of the district project management board shall notify the group of the time and place for capital disbursement 7 days in advance so that the group shall inform the members eligible for loans thereof. The project officials shall have to directly hand the money to such members.

Article 26.- Loan refunding

1. The responsibility to refund loans

The borrower shall have to refund the loan fully with the principal and the interest on time as already committed in his/her application as well as the loan contract; he/she may return the debt ahead of time.

2. Debt and interest-paying modes

For medium-term loans, the borrowers may pay their loan debts in installments monthly, quarterly, biannually and annually as agreed upon.

The borrowers may repay their loan debts and interests through the credit and savings group management boards or directly to the project.

The project shall have to notify in advance the time for loan recovery and send officials to the credit and savings group to recover the loans.

Article 27.- Debt prolongation

The borrower shall have to make the application for debt prolongation according form 06/TD set by the Program and send it to the provincial project manager at least 15 days before the due date stated in the loan contract. The provincial project manager shall decide the debt prolongation on the case by case basis. The prolongation duration for each loan shall not be longer than half (1/2) of the lending term. If the project manager refuses to prolong the debt payment, the debt applied for payment prolongation shall be turned into overdue debt.

Article 28.- Handling of overdue debts

A loan shall be considered an overdue debt when the loan principal payment deadline stated in the contract (including the period of debt prolongation) has already expired for one day or more. Where a borrower delays the payment of loan principal, he/she shall be subject to a penalty interest rate equal to 150% of the prescribed lending interest rate from the date the loan is turned into overdue debt.

30 days after the expiry date, if the borrower still fails to pay his/her overdue loan debt and interests thereon, the group shall have to use its own capital or its members� savings to pay such overdue debt for the borrower; if it is still not enough the group members shall have to make contributions to pay debt for such default borrower.

If the group remains unable to pay the loan debt to the Project 90 days after the expiry date, the credit capital allocation to the group shall be suspended.

If the value of the credit and savings group�s debts which have become overdue for more than 30 days exceeds 10% of the group�s total debt balance, the group shall have to suspend its lending activities. The provincial project manager/head of the district project management board shall quickly proceed with the investigation. If the group fails to make rectification and its overdue debt balance exceed 30% of the loan debt balance and the payment time limit has expired for more than 60 days, the Program shall withdraw the credit fund from the group.

If the borrower has deliberately used the loan capital for the wrong purpose(s), thus leading to the overdue debt, the objects bought with the loan capital shall be collected for handling; depending on the seriousness of the violations, the provincial project manager/head of the district project management board shall initiate a lawsuit according to law.

Article 29.- Handling irrecoverable debts

A loan shall be considered an irrecoverable debt if 180 days after the due date it remains irrecoverable. The irrecoverable loan shall be deducted from the capital sources owned by the credit and savings group for payment to the Program.

If the borrower has deliberately used the loan capital for the wrong purpose(s), thus leading to overdue debt, his/her loan capital shall be withdrawn, and depending on the seriousness of the violations, the provincial project manager/head of the district project management board shall initiate a lawsuit according to law.

Part V

PROVIDING LOANS TO MEMBERS THROUGH THEIR CREDIT AND SAVINGS GROUPS UNDER THE CONTROL AND SUPERVISION BY THE PROJECT

Article 30.- Conditions for loan provision to member households through groups.

Those credit and savings groups that meet the following conditions may be selected by the Project manager for loan provision to member households via groups:

1. Having the group�s statute clearly stating the joint responsibility of all group members for the capital amount borrowed from the Program�s capital sources;

2. The group�s management board is elected by members;

3. The management board members have been trained in and are capable of implementing, the regulations of the Program and the Project on the management of credit and savings activities.

Annually, the projects shall, based on the above-said criteria, select qualified groups for the application of this lending mechanism.

Article 31.- Capital-borrowing conditions.

Loans from the projects shall not require the property mortgage by groups. Those credit and savings groups which meet the following conditions may borrow credit capital from the Program:

1. Accepting the regulations of the Program and having the group�s statute;

2. The group members are capable of using the loan capital for the right purposes and refunding the loan capital;

3. The group members voluntarily apply for loans and the group makes a written request for loan capital, based on the production and/or business plans of such members. The group shall have to evaluate and select capital-borrowing requests of members.

4. The group and its members have been cleared of overdue loan debts of the Program;

5. All the group members agree with the record on the loan evaluation and selection by the group.

The lending terms, the lending interest rates, the division of profits from the interests on loans from the Program�s capital sources, the division of profits from the interests on loans from the groups� capital sources, and the lending levels: Similar to those in Articles 18, 19, 20, 21 and 22 of this Regulation.

Article 32.- Capital-borrowing dossiers

1. The documents related to the procedures for capital borrowing, loan consideration and approval, the debt prolongation, the transfer of members� loans into overdue debts are similar to those prescribed in Article 23 of this Regulation.

2. The documents related to the procedures for capital borrowing, loan consideration and approval, debt prolongation, and transfer of the group loans from the Program into overdue debts shall include:

a) The group�s loan application: made in one copy and sent to the Program.

b) The record on loan consideration and selection made in two copies with one being kept by the group and the other by the Project.

c) The lending notice, made in two copies, with one being kept by the Project and the other by the group.

d) The credit contract on lending to the group: made in two copies, with one being kept by the Project and the other by the group (the credit contract on the group�s lending to member households, shall be made in two copies, with one copy being kept by the concerned member and the other by the group).

3. The record on inspection of the use of loan capital, the application for debt payment prolongation, the notice on transfer of loans into overdue debts shall comply with forms prescribed in Article 23 of this Regulation, but shall be made between the group and the project, and each side will keep one copy.

Article 33.- Loan evaluation and approval procedures

1. The loan evaluation and approval procedure:

a) The group management board shall evaluate loan applications of members according to the applications� contents ;

b) The group meets, publicly evaluating members qualified for the loan, the loan amount and the lending term. The results of the group meeting and evaluation shall be included into the evaluation record and sent to the Project for use as basis for loan approval.

c) Loan approval by the Project: On the basis of the group evaluation record, the project manager shall sign the lending contract with the group.

2. Where a group is organized into various credit and savings teams, the group�s statute may stipulate the prior evaluation and selection of the members� loan applications by the teams themselves and the records thereon shall be sent to the group management board. The group management board and team leaders shall conduct the second-round evaluation of the loan application and scrutinize the teams� evaluation records for their synthesis into the group�s evaluation record which shall be sent to the project for use as basis for loan approval.

3. The time limit for loan evaluation and approval

The time limit for loan evaluation and approval is similar to that prescribed in Point 3, Article 24 of this Regulation.

4. In cases of necessity, the project may re-evaluate a number of loan proposals.

Article 34.- Disbursement of capital

Basing him-/herself on the approved loan dossiers, the Project manager/head of the district project management board shall inform the group of the time and place for capital disbursement 7 days in advance so that the latter may inform members who are entitled for loans thereof. The project officials shall have to hand over the money to the group management board right at the group office. The group management board shall have to disburse such sum of money to the concerned members to the witness of the Project �s officials. Within one day after receiving the loan sums from the Project�s officials, the group management board shall have to complete the capital disbursement and report it to the Project according to the set form of capital disbursement report.

Article 35.- Refunding loan capital.

1. The responsibility to refund the loan capital

The group shall have to refund the loan capital and pay the interests thereon fully and on time to the Project as committed in the loan application and the credit contract. The group can pay loan debts ahead of time. The group shall have to promptly remit the loans and interests thereon after its members pay to the group.

2. Methods of paying loan debts and interests thereon

The group leader shall have to notify the dates for regular collection of loan debts and interests thereon to the group members and the project shall send its officials to the group periodically for the collection of the loan principals. The group leader shall have to collect the loan interest and remit it to the Project or the Project shall send its officials to receive the money at the group. The group members may repay their medium-term loan debts in installments monthly, quarterly or biannually. The group members shall not repay their loan debts directly to the Project but repay them through the group management board.

Article 36.- Debt prolongation, handling of overdue debts and bad debts

The debt prolongation, the handling of overdue debts and the handling of bad debts with regard to the group�s loans from the Project shall comply with the provisions of Articles 27, 28 and 29 of this Regulation.

Part VI

SAVINGS

Article 37.- Savings of different kinds

1. The compulsory savings

The credit and savings group members shall have to make compulsory savings according to the group�s statute which prescribes the savings deposit amount and the deposit term, but the minimum regular savings deposit amount shall be 5,000 VNdong/month. If a group does not stipulate the regular savings payment by its members, it may stipulate the lump sum savings payment by its members with the minimum sum of 60,000 VNdong. When leaving the credit and savings group a member shall be entitled to take back his/her compulsory savings only if he/she has fully repaid his/her debts to the group and the Program, including the deduction for the settlement of responsibility which he/she has jointly borne with other members.

2. The voluntary savings

The credit and savings groups shall have to actively mobilize the voluntary savings in order to constantly increase their capital sources through the application of time voluntary savings of different types and the creation of favorable conditions for the depositors to easily withdraw their money according to the agreed time.

Article 38.- The interest rate on savings deposits

The savings interest rates paid by the group to the depositors shall be decided by the groups themselves but must not be higher than the Program�s lending interest rates.

Part VII

ACCOUNTANCY, AUDITING AND REPORTING

Article 39.- Accountancy regime

The provincial project shall have to abide by the uniform accountancy regime of the Program, including the accounting regime, the system of account books and vouchers.

Article 40.- Inspection, auditing and reporting

1. Inspection

The provincial projects shall have to biannually inspect the credit and savings activities of the credit and savings groups. The inspection shall cover the following contents:

a) The observance of the Program�s regulations;

b) The observance of the group�s statute;

c) The observance of the accounting and financial accountancy regime of the group;

d) The use and keeping of dossiers on credit and savings;

e) The cash fund safety.

All inspection results must be recorded in writing and summed up into reports to be sent to the Program�s Office through the MILS system.

2. Auditing

All organizations engaged in the RFS activities at the central, provincial, district, commune and/or credit and savings group levels shall have to make the financial reports in service of the independent auditing once every year.

3. Reporting

The higher-level project management boards shall have to assist their subordinates to fulfill the reporting regime.

Credit and savings groups shall monthly submit their reports on the real situation of their activities to the commune/district/provincial project management boards.

The district-level report must be compiled from reports submitted by the credit and savings groups; and the district level shall quarterly report to the provincial level.

The provincial projects shall quarterly submit MILS reports to the Program Board�s Office, and such reports have been summed up from the reports submitted by the districts.

Part VIII

IMPLEMENTATION PROVISIONS

Article 41.- The responsibility of the levels that manage the rural financial services

1. The Program Board�s Office

To help coordinate the advisory group with the provincial projects in implementing this Decision; to organize and implement the reporting regime according to the MILS system and sum up the entire program for reporting to the Program Board and SIDA.

2. The provincial projects

To guide and supervise the implementation of this Regulation by the district/ commune project management boards as well as the credit and savings group management boards in the provinces.

3. The ministerial project

To sum up the situation on the implementation of this Regulation by the provincial projects for reporting to the Ministry of Agriculture and Rural Development.

Article 42.- Conclusion of the Program

By the time the Program concludes, the provincial project managers shall have to carry out procedures for settlement of accounts and clearly state the loan debt balance, the fund cash remainder and report them to the functional bodies, and the People�s Committees of the provinces involved in the Program shall decide the settlement of existing problems related to the Program�s credit capital sources in the provinces.

For the Minister of Agriculture and

Rural Development

Vice-Minister/Head of the Management Board of the Vietnam-Sweden Program for Development of Mountainous Rural Regions
NGUYEN QUANG HA